Key facts
- Chancellor John Healey is tasked with implementing Andy Burnham's devolution agenda.
- The plan aims to devolve fiscal power to local leaders to drive growth.
- Previous regional development agencies were abolished in 2010.
- Burnham has established a £1bn "Good Growth Fund" for Greater Manchester.
- Mayors are expected to gain a larger share of locally generated tax revenue.
- Experts caution that the devolution plan could exacerbate economic disparities if poorly executed.
Chancellor John Healey is set to implement Prime Minister Andy Burnham's significant devolution agenda, aiming to redistribute fiscal power and foster economic growth across the United Kingdom. This initiative echoes a 1998 report co-authored by Healey and Ed Balls, which proposed regional development agencies (RDAs) to address the UK's economic divide. However, the RDAs were later abolished in 2010 under George Osborne's austerity measures, despite a National Audit Office report suggesting they had generated substantial returns.
Burnham has made devolution a central tenet of his government, establishing a £1 billion "Good Growth Fund" for Greater Manchester and planning to grant local governments a larger share of taxes raised within their communities. This move aims to incentivize local leaders to drive economic growth. The government faces concerns from the Treasury regarding "postcode lotteries" and potential loss of control over public finances, while acknowledging that the UK's centralized system contributes to regional inequality compared to countries like Germany and Sweden.
Experts warn that the success of this devolution plan is critical; failure could deepen economic divides, while success could attract significant investment. Treasury officials are grappling with designing a revenue distribution scheme that avoids leaving weaker regions behind, ensures long-term stability against future government cuts, and delivers sustained gains. Proposals range from a flat percentage of locally generated revenue, which could disproportionately benefit London, to a "pence in the pound" system across tax bands, or a risk-based approach to de-risk private investment in less productive areas.
The British Business Bank and the National Wealth Fund are considered crucial for supporting regional investment pots, though concerns have been raised about the Business Bank's focus and the National Wealth Fund's initial teething problems. Healey's past experience with a housing investment loans fund suggests a potential pathway for Burnham's vision of greater "public control" through devolved financial mechanisms.